Consumer Staples reflected relative strength over the previous week, moving above the 9/20ema. In addition, price action consolidated and the 200ma and VBP support. As RSI rises, we would anticipate back and fill price action along the path back to July highs. The 9/20ema have crossed over, with the short duration average above the medium term.
Staples is considered a defensive sector. The stocks highlighted herein show promise.
Kroger is printing a interim consolidation zone at 31.25. We anticipate a breakout this week, considering the interest in this defensive sector going into the election. VBP resistance dissipates above 31.58. MACD reflects continuous bullish momentum, while stochastic oscillates just above 50. We are setting stops at 31.00 (+/-) looking for an entry shy of Friday’s high of the day.
Conagra (CAG) should report just before Christmas. If the stock breakouts, there is no overhead supply to impede higher prices. We are looking for an entry at 48.00 (+/-) or better, with a stop at 47.40 (+/-).
Archer Daniels Midland (ADM) reports tomorrow. The stock has been consolidating since August. We would prefer to trade this stock post earnings and look at the company as a “long term position.” Stops will be set once earnings are out.
General Mills will likely turn the corner this week. We are anticipating the stock will build a base in this zone and eventually break back above the 200ma, if price can move back above the 9/20ema for starters. Therefore, we are waiting to see what happens this week. Also note stocks in this group have a similar pattern developing. Check out HRL and SJM, both showing institutional interest on Friday.
Outside of Consumer Staples there are pockets of strength.
IBD50 Listed stocks like PAYC look ready to breakout. The company reports tomorrow, so we will watch tomorrow for possible entry into this candidate. Note there is no overhead supply above 53.00.
Many of the short candidates are in the technology sector. HQY, BABA and many others are moving lower. The semiconductor industry group is also weak. Stocks like MX gapped lower on Friday. LRCX and MCHP look very similar.
LRCX is trading post-EPS. VBP and the 200ma are targets “if” semiconductors continue to show weakness.
Not all banks are created equal. While GS, JPM and MS continue to trudge higher, stocks like BPOP are moving lower. A scan of this industry group shows underlying weakness, despite imminent rate hikes.
Finally, we will be monitoring XLP and XLU for relative strength early this week, while keeping a close eye on healthcare, as it continues its descent. We are looking for a fade of overnight highs this morning as well.
Happy Monday – Vinny